Bad Record of Prabowo's First 100 Days: 12 Percent VAT Miscoordination

TEMPO.CO, Jakarta - The Center for Economics and Law Studies (Celios) considers the miscoordination regarding the 12 percent Value Added Tax () increase at the end of 2024 as one of the worst issues in the first 100 days of the Prabowo Subianto-Gibran Rakabuming Raka administration. Celios Director Bhima Yudhistira revealed that this assessment was based on a survey conducted by the institution among 95 journalists.

Bhima mentioned nearly half of the survey respondents agreed that inter-ministerial collaboration at the beginning of President Prabowo's administration was not optimal. "Inter-agency coordination is out of sync, with 46 percent of respondents rating that there is ineffective collaboration between ministries," said Bhima during the "Shadow Report on the First 100 Days of Prabowo-Gibran" discussion in Cikini, Jakarta, on Thursday, January 23, 2025.

For example, Bhima referred to the issue of the luxury goods VAT increase announced on New Year's Eve of 2024 as the worst miscoordination in the first 100 days of the administration. This miscoordination made Prabowo step in to clarify that the VAT increase to 12 percent would not apply to all types of goods, but only to luxury items.

According to Bhima, the Head of State should not have to announce the luxury goods VAT increase on New Year's Eve if coordination within the cabinet is well-functioning. "It should have been sufficient for Sri Mulyani, the Minister of Finance, to announce it," said Bhima.

Bhima claimed that the survey results conducted by Celios show coordination within the administration needs improvement. He stated that the miscoordination also indicates that the decision was made at the last minute and that there was a contrast between the president and the finance minister. As a result, industry players initially misunderstood and raised the prices of several goods that should not have been affected by the VAT increase.

As of January 1, 2025, a 12 percent applies to luxury goods. Referring to Article 2, Paragraph 3 of the Minister of Finance Regulation No. 131 of 2024, the category of goods subject to the 12 percent VAT includes motor vehicles and other goods subject to the luxury goods sales tax (PPNBM) following the provisions of tax legislation.

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